“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Franklin Resources Inc (NYSE: BEN)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 04/27/2010 |
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| End date: | 04/24/2020 | ||||
| Start price/share: | $37.66 | ||||
| End price/share: | $15.92 | ||||
| Starting shares: | 265.53 | ||||
| Ending shares: | 355.20 | ||||
| Dividends reinvested/share: | $10.50 | ||||
| Total return: | -43.45% | ||||
| Average annual return: | -5.54% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,655.61 | ||||
As we can see, the decade-long investment result worked out poorly, with an annualized rate of return of -5.54%. This would have turned a $10K investment made 10 years ago into $5,655.61 today (as of 04/24/2020). On a total return basis, that’s a result of -43.45% (something to think about: how might BEN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of BEN’s total return these past 10 years has been the payment by Franklin Resources Inc of $10.50/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of 1.08/share, we calculate that BEN has a current yield of approximately 6.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $37.66/share purchase price. This works out to a yield on cost of 18.00%.
One more piece of investment wisdom to leave you with:
“Your success in investing will depend in part on your character and guts and in part on your ability to realize, at the height of ebullience and the depth of despair alike, that this too, shall pass.” — Jack Bogle
